UPDATE 2-China to probe tech suppliers for security checks amid row with U.S.

(Adds Chinese Foreign Ministry comment)

By Li Hui and Megha Rajagopalan

BEIJING May 22 China will investigate providers
of important IT products and services to protect "national
security" and "economic and social development", the official
Xinhua news agency said on Thursday, amid a row over cyber
spying with the United States.

Companies that don't pass the checks will no longer be
allowed to supply products and services in China, Xinhua cited
the State Internet Information Office as saying. Products that
don't meet security requirements will be banned.

The likely consequences of the ruling were not immediately
clear but it comes amid a heated dispute with the United States,
after Washington charging five Chinese military officers with
hacking U.S. companies to steal trade secrets.

The Chinese media on Wednesday labelled the U.S. government
a "high-level hooligan", while official in Beijing have accused
Washington of "double standards" on issues of cyber spying.

When asked which governments or businesses China is targeting
with this move, Chinese Foreign Ministry spokesman Hong Lei
declined to directly respond, while defending the measures being
taken to vet companies providing IT products and services.

"The introduction of such a system will be the most
effective legal basis for safeguarding China's Internet security
and will also have a significant role in promoting the
construction of China as an Internet powerhouse," he told a news
briefing.

"China now accounts for the largest number of Internet users
in the world," he said.

China has also banned new central government computers from
using Windows 8, Microsoft Corp's latest operating
system.

This was done because of security concerns around Windows 8,
which exposes computers to monitoring and the risk of being
controlled remotely, the Communist Party mouthpiece People's
Daily newspaper reported on Thursday, citing a U.S. National
Security Agency programme called Prism.

Windows 8 was also not user-friendly, the People's Daily
added.

Xinhua said the investigations would check product security
and seek to prevent suppliers from illegally gathering, storing
or processing user data.

"For a long time, governments and enterprises of a few
countries have gathered sensitive information on a large scale,
taking advantage of their monopoly in the market and
technological edge," Xinhua quoted Jiang Jun, spokesman for the
State Council Information Office, as saying.

"They not only seriously undermine interests of their
clients, but also threaten cyber security of other countries."

A small number of governments and businesses "take advantage
of technological monopolies to collect sensitive data on a large
scale" from the Chinese government, business and institutions,
Xinhua added, saying there had been extensive wiretapping and
security breaches.

Xinhua did not give details of which governments or
businesses it was referring to but U.S. security standards for
information technology were not transparent or clear-cut, Xinhua
added.

China has also targeted other foreign tech firms in recent
months, including Qualcomm Inc.. The anti-monopoly
regulator accused the U.S. chip giant of overcharging and
abusing its market position.
(Additional reporting by Paul Carsten and Sui-Lee Wee; Editing
by Nick Macfie and Simon Cameron-Moore)

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